We have translated a further 5 CRA interpretations released in June and May of 1999. Their descriptors and links appear below.

These are additions to our set of 3,545 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 27 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5^th of each month).

The taxpayer incurred a loss in excess of $22 million in 2011 from trading in foreign exchange forward contracts using a straddle-trading strategy and realized a nearly identical gain in 2012 from the straddles. Monaghan JA confirmed the finding of the Tax Court that the 2011 loss was not a deduction in computing the taxpayer’s income because, in pursuing his foreign-exchange trading activities, the taxpayer’s intention was to incur a loss so that his trading was not a source of income.

She noted that, in Stewart and Walls, “the Supreme Court expressly equates ‘an activity undertaken ‘in pursuit of profit’ with ‘source of income’.’” After referring to Paletta Estate, she stated that in that case “by carefully reading and analyzing Stewart and Walls decisions … this Court demonstrated that those decisions preclude an activity pursued with no purpose other than to incur a loss from being considered a source of income.” She then stated:

To put it in the language of the Supreme Court, in the absence of a personal element we might ask “[f]or what purpose would the taxpayer have spent his time and money in this activity if not for profit?”: Stewart at para. 62. In most cases the obvious answer will be “for no other purpose”, therefore no further inquiry will be warranted, and “the appellant [will satisfy] the test for source of income”: Stewart at para. 62. However, in some (although I expect not many) cases, like Moloney, Paletta Estate and here, the evidence will lead the Tax Court to respond to that question, “for the resulting loss”. In those cases, the taxpayer will not satisfy the test for a source of income.

Neal Armstrong. Summary of Chad v. Canada, 2026 FCA 84 under s. 3(a) – business.

CRA found that where a foreign affiliate (FA2), which was owed an undocumented loan by a Canadian corporate taxpayer, was wound up into a US LLC (FA1) held directly by the taxpayer, this did not result in the repayment of such loan for purposes of the rule in s. 90(8)(a), which effectively required that the loan be repaid within two years - even though the taxpayer issued a note evidencing the loan now owing by it to FA1. CRA stated:

Where there are no changes to the terms of a loan other than the identity of the creditor … an assignment of the loan to a new creditor would not generally cause an extinguishment of the loan or substitution for a new one.

However, CRA accepted that the loan was repaid as a result of FA1 paying a dividend to the taxpayer through the issuance of a promissory note, with that note then being set off against the loan owing by the taxpayer to FA1. In particular, s. 90(8)(a) did not require the repayment to be made to the original creditor.

Although in fact this repayment by set-off occurred many years after the initial loan, a transitional rule deemed that loan to have been issued on August 19, 2014, which was less than two years before the set-off transaction.

Neal Armstrong. Summary of 24 July 2023 Internal T.I. 2020-0841891I7 under s. 90(8)(a).

A general discussion of the second package of hybrid mismatch rules released on January 29, 2026 includes a discussion of the imported mismatch arrangement rules.

The proposed rules in ss. 18.4(15.91) to 18.4(15.95) to deny deductions for payments arising under an imported mismatch arrangement would apply to mismatch arrangements that are offshore, i.e., there is no Canadian entity directly party to the offshore mismatch, so that the deduction/non-inclusion (D/NI) or double deduction (DD) mismatch is not otherwise neutralized in Canada or under a foreign hybrid mismatch rule.

This result is accomplished through the concepts (in s. 18.4(15.92)) of an “importing payment”, i.e., a payment that is deductible in Canada made to an entity not resident in Canada, and a “mismatch payment,” i.e., a payment giving rise to an “offshore hybrid mismatch amount” – which, as determined under s.18.4(15.91), is a hybrid mismatch in respect of a payment where the payer or recipient is not a resident of Canada.

An imported mismatch arrangement may also apply in cases of payments that are indirectly related to an offshore mismatch. This is achieved through referring in s. 18.4(15.92) to the situation where there is an indirect link between the mismatch payment and the importing payment involving a chain of payments starting with the importing payment and ending with a payment made to the payer of the mismatch payment.

It is observed that:

The imported mismatch rules may deny a deduction in Canada in respect of a payment that is directly or indirectly connected to the offshore mismatch. This broad extension of the rules requires tracing payments made in offshore structures, identifying any D/NI and DD mismatches under foreign tax laws, assessing the operations of foreign hybrid mismatch rules in all affected jurisdictions, and identifying the linkage to any deductible payment supporting that offshore mismatch. … This is in contrast with the BEPS Report, which intended for imported mismatch arrangement rules to apply only where the taxpayer and the parties to the imported mismatch arrangement were part of the same control group.

Neal Armstrong. Summary of Tessa Reah and Brian Leslie, “From Instruments to Entities: Canada Expands Its Hybrid Mismatch Rules,” International Tax (Wolters Kluwer), February 2026, No. 146, p. 1 under s. 18.4(15.92).